State Farm Too Quick To Deny Coverage, Court Rules
July 22, 2011 — CDJ Staff
On July 13, 2011, Judge Sarah S. Vance of the US District Court issued a rule in the case of Travelers Cas. & Surety Co. of Am. v. Univ. Facilities, Inc. (E.D. La., 2011). In this case, Stanley Smith Drywall was contracted by Capstone Building Corporation to “perform undisclosed work at the facility believed to involve the installation of drywall.” The project involved the design and construction of student residences for the Southeastern Louisiana University in Hammond, Louisiana. In May, 2009, University Facilities, Inc. (UFI) sued Capstone Development Corporation and Capstone On-Campus Management.
State Farm insured Stanley Smith Drywall and they sought a declaration that they have no duty: “(1) to insure Stanley Smith or CBC, or (2) to defend or indemnify any party against UFI's claims in the pending arbitration.” State Farm contends “(1) there is no "occurrence" to trigger coverage under the policy; (2) only breach of contract claims are asserted; (3) there is no property damage alleged; and (4) various coverage limitations and exclusions apply to prevent coverage.’
The court concluded that “whether State Farm has a duty to defend in the arbitration must be determined by considering the claims asserted in the arbitration.” However, the arbitration claims were not made part of the record. There, “, the Court cannot determine as a matter of law State Farm's duty to defend on the present record.” The same was true of State Farm’s duty to indemnify. “Stanley Smith and CBC assert that State Farm's motion for summary judgment was filed before any discovery was conducted in the arbitration proceeding or in this case. The Court finds that State Farm has failed to develop the record sufficiently to establish that there is no genuine issue of material fact as to its duty to indemnify Stanley Smith or CBC in the arbitration.’
The court denied State Farm’s motion for a summary judgment on its duty to defend and indemnify.
Read the court’s decision…
Texas Court of Appeals Conditionally Grant Petition for Writ of Mandamus to Anderson
April 25, 2011 — April 25, 2011 Beverley BevenFlorez - Construction Defect Journal
The Texas Court of Appeals conditionally grant mandamus relief to Anderson Construction Company and Ronnie Anderson (collectively “Anderson”)… from the trial court in a construction defect lawsuit filed by Brent L. Mainwaring and Tatayana Mainwaring. See Tex. Prop. Code Ann. 27.001-.007 (West 2000 & Supp. 2010). Relators contend the trial court abused its discretion by compelling discovery while the case was abated by operation of law.
The Court of Appeals opinion describes what led up to the proceedings: “The Mainwarings’ original petition identified certain defects in their Anderson-constructed home. Those defects concerned the roof trusses and framing, air conditioning, mortar and masonry, exterior doors and windows, and weep holes. With respect to the five areas of defects identified in their original petition, the Mainwarings gave Anderson the statutorily required notice on January 13, 2010. After implementing agreed extensions, Anderson made an offer of settlement for the defects the Mainwarings identified in their notice. Almost eight months later, the Mainwarings filed an amended petition adding defects they had not included in their original petition and notice. The additional defects the Mainwarings included in their amended petition had not been addressed by Anderson’s offer of settlement.”
Following these events, Anderson claimed the Mainwarings did not respond in writing to their settlement offer. “Anderson filed a verified plea in abatement on December 2, 2010. In the trial court, Anderson claimed that the Mainwarings failed to respond in writing to Anderson’s settlement offer, as required by Section 27.004(b) of the RCLA. See Tex. Prop. Code Ann. 27.004(b)(1). The Mainwarings moved to compel discovery responses from Anderson. The Mainwarings alleged that they rejected Anderson’s settlement offer, and that if their response was insufficient, they contend that Anderson’s offer was rejected by operation of law on the twenty-fifth day after the Mainwarings received it. See Tex. Prop. Code Ann. 27.004(i). The Mainwarings’ motion to compel was not supported by affidavit. See Tex. Prop. Code Ann. 27.004(d)(2). On January 13, 2011, Anderson filed a verified supplemental plea in abatement. Anderson alleged that the Mainwarings failed to provide written notice concerning the newly alleged defects and complained the Mainwarings were attempting to circumvent the inspection and resolution procedure of the RCLA. Over Anderson’s objection that the lawsuit had been abated, the trial court granted the Mainwarings’ motion to compel discovery.”
After listening to both sides, the Court of Appeals offered this reasoning for their opinion: “The parties do not dispute that Anderson inspected the property before the Mainwarings alleged the existence of additional defects in their amended pleading, nor do the Mainwarings claim that Anderson has been given an opportunity to inspect the additional defects the Mainwarings identified in their amended pleadings. We conclude the trial court did not have the discretion to deny or lift the abatement until the Mainwarings established their compliance with the statute. In other words, the Mainwarings are required to provide Anderson a reasonable opportunity to inspect the additional defects identified by their amended pleading, which will allow Anderson the opportunity to cure or settle with respect to the newly identified defects.”
The Court of Appeals spoke directly on the issue of mandamus relief: “The Mainwarings contend that mandamus relief is not available because the trial court’s ruling does not prevent Anderson from making settlement offers during the discovery process. ‘An appellate remedy is “adequate” when any benefits to mandamus review are outweighed by the detriments.’ In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 136 (Tex. 2004). The failure to abate a case is typically not subject to mandamus. See In re Allstate Cnty. Mut. Ins. Co., 85 S.W.3d 193, 196 (Tex. 2002) (citing Abor v. Black, 695 S.W.2d 564, 567 (Tex. 1985)). In this case, however, the case was abated by operation of law. By ignoring the statutory abatement, the trial court interfered with the statutory procedure for developing and resolving construction defect claims. See In re Kimball Hill Homes Tex., Inc., 969 S.W.2d 522, 525 (Tex. App. Houston [14th Dist.] 1998, orig. proceeding) (An appeal provides an inadequate remedy for the trial court’s failure to observe automatic abatement pursuant to the RCLA.). The benefits of mandamus review are not outweighed by the detriments of mandamus review in this case.“
In conclusion, “The trial court had no discretion to compel discovery while the case was abated, and Anderson, who has been compelled to respond to discovery during a period the case was under an automatic abatement, has no adequate remedy on appeal. Accordingly, we conditionally grant the petition for writ of mandamus. The writ will issue only if the trial court fails to vacate its order of February 3, 2011, and fails to refrain from proceeding with the case until a motion to reinstate is filed that establishes compliance with the notice and inspection requirements of the Residential Construction Liability Act.”
Read the trial court’s decision…
Changes To Indemnification Statute Are Here! Say Hello To Defense Duties
June 19, 2012 — Douglas Reiser, Builders Counsel
A months back, I discussed the passage of SHB 1559. The law changes the existing statutory indemnification regulation to include the costs of defense and to rid contracts of unfair indemnification for someone else’s sole negligence. The law went into effect last week!
Check back to my recent article on the changes set forth in the new law. The amendments to RCW 4.24.115 will broaden the existing law and clarify what types of indemnification are unenforceable. In short, an “up the chain” contractor (such as a general contractor) cannot expect to pass 100% of the defense and indemnification obligations downward if it is partially liable.
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Reprinted courtesy of Douglas Reiser of Reiser Legal LLC. Mr. Reiser can be contacted at info@reiserlegal.com
Don MacGregor To Speak at 2011 West Coast Casualty Construction Defect Seminar
January 1, 2011 — February 08, 2011 CDJ Staff
“Challenges for Experts in Construction Defect Claims and Litigation” will be held Thursday May 13, 2011 between 1:30 and 3:00 PM at this year’s West Coast Casualty Construction Defect Seminar. Among the various topics covered will be of Right to Repair/Opportunity to Repair statutes, improper testing methodologies, new challenges where a case involves a Wrap Policy, OCIPS, CCIPS, and other owner controlled insurance programs, as well as the need for realistic testing protocols for the party the expert is retained to represent.
During the presentation Mr. MacGregor will be working in connection with a group of construction and design experts each of which have extensive experience with construction defect and claims related litigation. This particular session is expected to attract a standing-room only crowd, drawing in excess of 1700 attendees.
The West Coast Casualty Construction Defect Seminar is the largest seminar of its type. This year’s event is scheduled for will take place on May 12 and 13, 2011, at The Disneyland Hotel and Resort. For more information regarding the years event please visit http://www.westcoastcasualty.com/dyncat.cfm?catid=3322
http://www.westcoastcasualty.com/dyncat.cfm?catid=3322
Court Consolidates Cases and Fees in Soil Construction Defect Case
August 16, 2012 — CDJ Staff
The California Court of Appeals has ruled in Burrow v. JTL Development. JTL Development had appealed a judgement in a construction defect case in which JTL Development and Highland Development were found liable for damage due to homes built on unstable and improperly compacted soil. The two companies were sued by the two sets of homeowners, the Burrows and the Balls, and their cases were consolidated at trial. Each family was awarded $700,000 in damages. This judgement had also been appealed and affirmed by the appeals court. In the current case, an additional $235,800 in cost-of-proof sanctions had been awarded to the two families.
Before the trial, Dale Burrows, Charles Ball, and Laurie Ball “asked JTL and Highland to admit that they ‘approved grading plans’ for the Burrows’ and Balls’ properties; ‘had knowledge that the [properties] contained improperly compacted fill’; ‘had knowledge that the [properties were’ not properly prepared for structures’; and ‘did not provide Plaintiffs with a complete soils report’ prepared by Gorian & Associates.” These were requests 14, 19, 20, and 22. JTL and Highland denied all of these.
At trial, the Burrows and Balls proved that all these were true. JTL and Highland’s geotechnical subcontractor, Gorian & Associates, had “recommended that Highland remove and re-compact the entire tract to a depth of 25 feet.” JTL and Highland did not follow this recommendation, “in order to avoid expense.”
After judgment, the Burrows and Balls moved for $582,587.45 for “attorneys’ fees and costs incurred proving the truth of requests for admission.” JTL and Highland claimed that only Dale Burrows could recover fees, but that also the fees were not recoverable. Joe Lynch of Highland “declared that he always believed the soils under the Burrows and Balls homes were properly compacted.” The Burrows and Balls responded with six identical sets of requests for admissions and the court awarded each of them twenty-five percent of $235,800, with JTL and Highland each responsible for fifty percent.
The appeals court noted that JTL and Highland filed a timely appeal and goes on to notes the four circumstances under which a responding party does not have to pay costs and fees. The court concluded that none of these were met. Instead of waiving the request, JTL and Highland denied the request, stating “without in any manner waiving the foregoing objection, responding party denies the request for admission.”
Nor was the admission “of no substantial importance,” instead the court said that the matters were of “substantial importance,” and the “trial would have been shortened by their admission. Highland and JTL “relied on Gorian when it denied the request,” but the trial court “discredited Lynch’s assertions,” finding that “Highland knew the soil was improperly compacted.”
As all plaintiffs had identical discovery requests, the court rejected the claim that only Dale Burrows was entitled to an award.
Read the court’s decision…
A Loud Boom, But No Serious Injuries in World Trade Center Accident
March 1, 2012 — CDJ Staff
The Wall Street Journal reports that nearly twenty tons of steel fell forty stories at the World Trade Center site on February 16. One person was checked by medical personnel. One person who works in the Financial District said it was “almost like thunder.” Frank Pensabene, one of the ironworkers on the site said that after “loud boom,” “all hell broke loose.” The steel beams and cables fell onto a flatbed truck, which was not occupied at the time.
Read the full story…
Alabama “occurrence” and subcontractor work exception to the “your completed work” exclusion
November 18, 2011 — CDCoverage.com
In Town & Country Property, LLC v. Amerisure Ins. Co., No. 1100009 (Ala. Oct. 21, 2010), property owner Town & Country contracted with insured general contractor Jones-Williams for the construction of a car dealership. All of the construction work was performed by Jones-Williams subcontractors. After completion, Town & Country sued Jones-Williams for defective construction. Jones-Williams’ CGL insurer Amerisure defended. The case was tried and a judgment was entered against Jones-Williams in favor of Town & Country. After Amerisure denied any obligation to pay the judgment, Town & Country sued Amerisure in a statutory direct action.
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Reprinted courtesy of CDCoverage.com.
Connecticut Gets Medieval All Over Construction Defects
February 10, 2012 — CDJ Staff
The Hartford Courant reports that Connecticut is trying a very old tactic in a construction defect suit. The law library building at the University of Connecticut suffered from leaks which have now been repaired. The state waited twelve years after was complete to file lawsuit, despite that Connecticut has a six-year statute of limitations on construction defect claims. Connecticut claims that the statute of limitations does apply to the state.
The state is arguing that a legal principle from the thirteenth century allows it to go along with its suit. As befits a medieval part of common law, the principle is called “nullum tempus occurrit regi,” or “time does not run against the king.” In 1874, the American Law Register said that nullum tempus occurrit reipublicae “has been adopted in every one of the United States” and “is now firmly established law.”
In the case of Connecticut, Connecticut Solicitor General Gregory D’Auria said that “the statute of limitations does not apply to the state.” He also noted that “the state did not ‘wait’ to file the lawsuit. The lawsuit was filed only after all other options and remedies were exhausted.”
Connecticut also argued that “nullus tempus occurrit regi” applied in another construction defect case at the York Correctional Institution. The judge in that case ruled in December 2008 to let the case proceed. But in the library case, Judge William T. Cremins ruled in February 2009 that the statute of limitations should apply to the state as well. Both cases have been appealed, with the library case moving more quickly toward the Connecticut Supreme Court.
Read the full story…
Georgia Supreme Court Rules Construction Defects Can Constitute an Occurrence in CGL Policies
April 5, 2011 — April 5, 2011 Beverley BevenFlorez - Construction Defect Journal
Recently, the Supreme Court of Georgia reversed the decision in American Empire Surplus Lines Insurance Company v Hathaway Development Company, Inc. stating that because Whisnant’s faulty workmanship caused damage to the surrounding properties, the construction defects constituted “occurrences” under the Commercial General Liability (CGL) policy. Unlike the South Carolina Supreme court ruling in the case of Crossman Communities v Harleysville Mutual, the Georgia Supreme Court stated that an accident can happen intentionally if the effect is not the intended result.
Interestingly, the only dissenting judge, J. Melton, disagreed with his colleagues on the basis that “although the term ‘accident’ is not specifically defined in the policy, it is axiomatic that an ‘accident’ cannot result from ‘intentional’ behavior.” It is clear that what constitutes an occurrence in CGL policies is still being hotly debated.
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Tucson Officials to Discuss Construction Defect Claim
July 10, 2012 — CDJ Staff
The mayor of Tucson, Arizona and the city council scheduled a meeting on June 26, 2012 in order to consult with the city’s attorneys concerning possible construction defect litigation involving the Martin Luther King, Jr. apartment building in that city. The memorandum was authored by Richard Miranda, the Tucson city manager.
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Statutes of Limitations May be the Colorado Contractors’ Friend
April 18, 2011 — April 18, 2011 Beverley BevenFlorez - Construction Defect Journal
Albert Wolf, a principal in Wolf Slatkin & Madison P. C., has written an interesting article on statutes of limitations in construction defect claims in Colorado. While Wolf states that in most cases, “construction defect claims against construction industry participants (contractors, subcontractors, architects, engineers, etc.) requires that suits be started within two years after construction defects have been or should have been—in the exercise of reasonable diligence (care)—discovered,” if a project used the AIA General Conditions (AIA Document A2010) before the 2007 edition, the “statutes of limitations begin to run (accrue) at either substantial completion or breach by the contractor (installation of defective work), depending on the circumstances.”
“That’s a huge difference,” Wolf writes in his article. “For example, if the structural defect caused by faulty foundation work is not discovered or discoverable until walls begin to exhibit cracking more than two years after the building is completed, the owner’s claim against the contractor may be barred if the AIA provision is applied.”
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Texas covered versus uncovered allocation and “legally obligated to pay.”
April 27, 2011 — April 27, 2011, by CDCoverage.com
In Markel American Ins. Co. v. Lennar Corp., No. 14-10-00008-CV (Tex. Ct. App. April 19, 2011), insured homebuilder Lennar filed suit against its insurer Markel seeking recovery of costs incurred by Lennar to repair water damage to homes resulting from defective EIFS siding. Following a jury trial, judgment was entered in favor of Lennar and against Markel. On appeal, the intermediate appellate court reversed. Applying Texas law, the court first held that Lennar failed to satisfy its burden of allocating damages between covered and uncovered. In a prior decision, the court had held that, while the costs incurred by Lennar for the repair of the resulting water damage
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Reprinted courtesy of CDCoverage.com
In Colorado, Primary Insurers are Necessary Parties in Declaratory Judgment Actions
December 9, 2011 — Heather M. Anderson, Colorado Construction Litigation
The United States District Court for the District of Colorado recently ruled that primary insurers are necessary parties, under Fed. R. Civ. P. 19, in a declaratory judgment action being pursued by an excess carrier. See Insurance Co. of State of Pennsylvania v. LNC Communities II, LLC, 2011 WL 5548955 (D. Colo. 2011). Federal Rule of Civil Procedure 19 is almost identical to Colorado Rule of Civil Procedure 19 and pertains to the joinder of persons needed for “just adjudication.” The Insurance Co. of the State of Pennsylvania (“ICSOP”) sought a declaratory judgment that it did not have a duty to defend or indemnify the defendants (collectively referred to as “Lennar Companies”) with regard to the underlying lawsuit brought by The Falls at Legend Trail Owners Association, Inc. (the “HOA”). Id. at *2. In its lawsuit, the HOA alleged Lennar Companies were liable for construction defects at The Falls at Legend Trail residential development.
Lennar Companies held two primary insurance policies, one issued by OneBeacon Insurance Company f/k/a General Accident Insurance Company (“General Accident”) and the other issued by American Safety Risk Retention Group, Inc. (“American Safety”). Lennar Companies also carried excess policies issued by ICSOP and Ohio Casualty Insurance Company (“Ohio Casualty”).
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Reprinted courtesy of Heather M. Anderson of Higgins, Hopkins, McClain & Roswell, LLP. Ms Anderson can be contacted at anderson@hhmrlaw.com
Construction Demand Unsteady, Gains in Some Regions
June 29, 2011 — CDJ Staff
The Associated General Contractors of America reported Tuesday, June 28 that construction employment increased in 120 of the 337 metropolitan areas surveyed between May 2010 and May 2011.
‘While construction employment has stopped plunging, any sign of a recovery remains spotty at best,” said Ken Simonson, the association’s chief economist. ‘The close to even split between areas adding and losing jobs is a reminder that for every market doing well, there is another market that is still hurting.”
The largest number of jobs created was in the Dallas, Texas region, with 5,600 new jobs, a five percent increase. The northern Massachusetts/southern New Hampshire region near Haverhill saw the greatest percentage increase, although that twenty-two percent increase represents only 800 new jobs. The Chicago, Illiinois area added 4,600 jobs, a four percent increase.
Other regions were not so lucky. The Atlanta, Georgia area saw a loss of 7,400 jobs, an eight percent loss. Las Vegas also lost 7,400 jobs, which there represented a sixteen percent decline. The New York City area lost 6,700 jobs, a six percent reduction. The Riverside, California area lost 5,300 jobs, a nine percent loss.
Stephen E. Sandherr, the association’s chief executive officer, blamed a combination of regulation and budget squeezes. "Some in Washington never met a regulation they didn’t like and others never found a penny they didn’t want to pinch. Together that makes for a bad way to boost employment and a great way to stifle the private sector and neglect critical economic infrastructure.”
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Court finds subcontractor responsible for defending claim
May 18, 2011 — May 18, 2011 - CDJ Staff
In an unpublished decision, the California Fourth Appellate District Court has reversed the judgment of Judge Linda B. Quinn of the Superior Court of San Diego. In the case Inland California, Inc. v. G.A. Abell, Inland, a general contractor had subcontracted with Apache Construction and Precision Electric Company (G.A. Abell).
Apache alleged that extra demolition and drywall work was needed due to Precision’s electrical work. Inland tendered a defense of Apache’s claims. However, Precision did not provide any defense. Inland withheld payment from Precision.
At trial, Inland “conceded Precision earned the $98,000 in progress payments Inland withheld.†They were obligated to additionally pay Precision’s costs and attorney fees.
The Fourth Appellate District court has overturned this and remanded the case back to the lower court. The judges determined that Precision was obligated to defend itself against the claims raised by Apache and therefore vacated the judgment against Inland.
Read the court’s decision…
The Complete and Accepted Work Doctrine and Construction Defects
August 16, 2012 — CDJ Staff
Matthew C. Bouchard of Lewis & Roberts PLLC, writes how North Carolina is “bucking the trend” on the “complete and accepted work doctrine.” As he notes, in most states “a contractor can be found liable for personal injuries suffered by third parties from accidents occurring after the contractor’s work is completed and accepted.” But one exception is North Carolina.
He gives the example of a case, Lamb v. D.S. Duggins Welding, Inc., in which a site superintendent was “injured by the alleged negligence of the project’s steel deck installer, a sub-subcontractor in the contractual chain” “after the sub-sub’s work had been completed and accepted.” The trial court held that the “completed and accepted work doctrine” ended the subcontractor’s liability. The case noted that “employees of the general contractor had modified the installation of the perimeter safety cable in question after the sub-sub had demobilized from the site.”
Mr. Bouchard notes that “once a project is accepted and turned over, the contractor typically loses control over maintenance of the new facility.” However, he notes that “where the contractor’s work constitutes negligence ?Ķ the doctrine may not apply.” Nor does it end breach of contract claims. It only covers third parties.
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Washington Court of Appeals Upholds Standard of Repose in Fruit Warehouse Case
August 4, 2011 — CDJ Staff
On July 28, the Washington Court of Appeals ruled in Clasen Fruit & Cold Storage v. Frederick & Michael Construction Co., Inc. that more than six years had passed since a contractor had concluded work and so granted a summary dismissal of the suit.
Frederick & Michael Construction Co., Inc. (F&M) was contracted to construct several buildings for Clasen Fruit and Cold Storage. These were completed in March, 1999. The buildings suffered wind damage to the roofs in 2001, 2003, 2005, and 2006. In the first two incidents, F&M repaired the roofs with Clasen paying for repairs.
In 2005, Clasen hired Continuous Gutter to make repairs. The final incident was the collapse of the roof of one building. This was attributed to “excessive moisture in the roof’s vapor barriers.” At this point, Clasen demanded that F&M pay for repair and replacement costs. In 2008, Clasen sued F&M for damages for breach of contract and negligent design and construction of the roof.
The decision then covered the meanings, in Washington law, of “termination of services” and “substantial completion.” The panel concluded that construction was “substantially completed in 1997” and “relevant services” by 2001. “But Clasen did not sue until 2008, some seven years after termination of any roof related services.”
Read the court’s decision…
Hawaii Building Codes to Stay in State Control
March 1, 2012 — CDJ Staff
The Hawaii State Senate voted down Senate Bill 2692. Had it been passed, the State Building Code Council would have been abolished and building codes would have become the responsibility of county governments. The bill was opposed by the Insurance Institute for Business and Home Safety. Their director of code development, Wanda Edwards said that the bill “would have undermined key components that are essential to an effective state building code regime.”
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